STATE OF BUSINESS: Tighter Money?

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Will the tight money market get tighter still? Last week, Wall Street apparently feared that it would, and that worry, plus year-end tax selling and the Suez crisis (see below), sent stocks on the Dow-Jones industrial average edging down to 472.56, nearly 50 points off the peak last April. The tip-off to Wall Street was the U.S. Treasury's action: it had to offer an interest rate of 3.043% to sell $1.6 billion worth of 90-day bills, a rate slightly higher than the Federal Reserve's 3% rediscount rate. Traditionally, when the Treasury rate climbs above the rediscount rate, it means another rediscount boost by the Federal Reserve. In fact, had it not been for possible upsets to business threatened by the Middle East crisis, most economists thought that money would have already been tightened.

A main worry of Wall Street—and many an individual businessman—was that increasingly tight money might pinch off business expansion. Thus far, the future still looks bright. The Commerce and Labor Departments estimated last week that a record $44.1 billion will go for new construction this year, another record $46.4 billion in 1957. But home building has already been hard hit by the money shortage. Home building is down to an estimated 1.1 million units this year with 1957 estimates lower. To bolster the market, Housing Administrator Albert Cole hopes to get increased lending power for the Federal National Mortgage Association. Furthermore, he plans to urge a hike in Veterans' Administration and FHA interest rates of another ½% to 5% to make mortgages more attractive to investors and ease the money pinch for builders.